In short, your credit score is quite a big deal. It can open many doors for you, whether it’s buying a house, financing a car, or applying for a new credit card. For instance, if you’re hoping to secure your first property, you may need a loan to finance it. When you apply for the loan (credit), your potential lender will evaluate how big a risk you pose as a borrower (i.e. the likelihood of being late with repayments or not paying them back). The lender will run a credit check on you as part of their assessment.
A credit score is a tool often used in deciding how likely it is that you'll pay the lender back as agreed. The methods and criteria behind the scoring tend to be secretive, as no company wishes to disclose the exact algorithms they use to competitors. What we know is that the higher your score, the better!
(In Singapore, your credit score is a 3 or 4 digit number based on your credit report.)
Changes to your score can have a big impact on your life. A good credit score indicates that you are paying your bills on time and likely to pay lenders back. As a result, you can benefit from lower-than-average interest rates, approval for credit cards, as well as personal, business, or student loans. Over the years, this could save you thousands of dollars. However, a poor credit score will mean your credit options are limited and more expensive.
The Monetary Authority of Singapore has authorised two credit reporting agencies: Experian Credit Bureau Singapore (ECBS) and Credit Bureau Singapore. Both can issue credit reports and credit scores.
Your credit report is different from your credit score. A credit report is a statement with detailed information about a person's finances, including credit activity, loan repayment history and the status of all credit accounts. A credit score is calculated from the data in that report.
The impact of your credit report can go beyond financial implications. Your credit report can also impact your level of employability, which may come as a surprise. Businesses are increasingly likely to use your credit report as a judgement of how responsible you are. A bad credit report indicates that you could be irresponsible.
Photo by Stephen Phillips on Unsplash
Credit bureaus create credit reports and receive information from their members, storing information such as:
Based on these factors, the Credit Bureau of Singapore and DP Credit Bureau (Experian) give a credit score for each person. The Credit Bureau of Singapore score ranges from 1000 to 2000, whilst a score from the DP Credit Bureau ranges between 0 and 781. The table below, adapted from CBS, displays the risk grades and probabilities of default for the respective score ranges.
WHAT IS A CREDIT SCORE? COMPLETED. ✅
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